Written Commentary
CRUDE OIL
While petroleum markets are calming down after recent volatile action, crude oil continues to outperform both product markets, due in part to supply bottlenecks. Global risk sentiment continues to show improvement, but demand remains a concern, and this could lead to a bumpy finish to the month and quarter. The NBS Chinese manufacturing and non-manufacturing PMIs both came in higher than trade forecasts, which helps strengthen outlook for the Chinese demand. Iraq continues to prevent Kurdistan crude oil from being shipped by pipeline to the Mediterranean. There were reports that the OPEC Plus nations will maintain their current quotas at next week’s virtual meeting, and that they could keep those quotas in place through the end of this year. There was a sharp decline in US crude oil stocks this week, but keep in mind they have been above 470 million barrels for seven weeks in a row. The four-week average for US crude oil imports has fallen below 6 million barrels per day for the first time since May 2021. US crude oil production has been relatively stable since the start of this year, and that may put more attention on today’s Baker Hughes US oil rig count. The Dallas Fed’s latest energy survey said that oil exploration showed little to no growth during the first quarter.
NATURAL GAS
Natural gas prices were near unchanged overnight and close to Thursday’s 2 1/2 year low. The weekly EIA storage report yesterday showed a smaller than expected decline, which put fresh pressure on natural gas prices. Over the last four weeks, storage has declined 261 bcf. There are indications that the Freeport LNG terminal is taking in 2.1 bcf per day of natural gas, which may be close to even or at their full liquification capacity. This suggests overall feedgas flows to US LNG facilities could climb above 14 bcf per day, which would set a record. The market continues to be pressured by mild weather and ample storage in the US and Europe despite having a large spec net short position in the most recent Commitments of Traders report.
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